Yahoo Finance OCBC Powers On with Net Profit of S$1.2 Billion in its Latest Quarter: 5 Things Investors Need to Know
OCBC Ltd (SGX: O39) has released its fiscal 2021 third quarter (3Q2021) and nine-month (9M2021) business update.
The lender saw its net profit surpassing the S$1 billion mark once again, after reporting a net profit of S$1.1 billion for its second quarter.
CEO Helen Wong affirmed that the bank’s results were resilient, with growth recorded across its three main arms of banking, wealth management, and insurance.
Not only has the bank performed well, but it is also focusing on its ESG efforts to further its sustainability agenda.
Here are five things investors need to know about OCBC’s latest quarterly earnings.
Continued growth in net profit
3Q2021 saw the bank’s net interest income rise 3% year on year to S$1.46 billion.
Non-interest income dipped slightly by 2% year on year to S$1.1 billion, mainly due to a fall in trading income from marked-to-market losses on investments from its insurance unit, Great Eastern Holdings (SGX: G07).
Despite the above, total income still inched up 1% year on year to S$2.56 billion.
Meanwhile, operating profit before allowances dipped by 5% year on year to S$1.37 billion due to an 8% year on year increase in expenses from higher headcount and lower government grants.
Total allowances fell by more than half to S$163 million, resulting in net profit climbing by 19% year on year to S$1.22 billion.
A surprise dip in NIM
Net interest margin (NIM) showed a surprise quarter on quarter dip from 1.58% to 1.52%.
The bank attributed this to lower returns on invested assets along with the reversal of interest income previously recognised.
Over the last four preceding quarters, NIM had slowly crept up from 1.54% to 1.58%.
For 9M2021, overall NIM was 0.08 percentage points lower at 1.55% versus 1.63%.
Healthy, broad-based loan growth
The lender chalked up a healthy 6% year on year rise in its loan book to S$285 billion as of 30 September 2021.
The growth was broad-based across all the bank’s geographies.
Singapore saw a 5.5% year on year increase to S$116 billion and made up the largest proportion of OCBC’s loan book at 40.7%.
Greater China, which made up around a quarter of its loan book, enjoyed a 9% year on year increase.
Loans to the rest of the world increased by 11.4% year on year to S$49 billion.
Wealth management division performing well
OCBC’s wealth management division continues to grow, with private banking assets under management (AUM) increasing by 6% year on year to US$123 billion.
However, this AUM was down slightly from the prior quarter’s US$125 billion due to a fall in market prices.
Wealth management income for 9M2021 increased by 13% year on year to S$3 billion and formed 38% of total group income.
For 3Q2021, though, wealth management income fell by 7.4% year on year due to unrealised losses for Great Eastern’s investment portfolio.
Focusing on its digital transformation
OCBC continues to invest in its digital capabilities.
It aims to grow and deepen customer engagement to provide them with a better overall experience.
For 9M2021, 98% of small and medium enterprises opened an OCBC account digitally, while loans that were digitally secured surged by 3.5 times year on year.
The bank also launched an operational excellence program and improved the scale of its agile delivery model to deliver enhancements to existing processes.
In line with these initiatives, OCBC became the first to launch a virtual purchase card and also allowed for face recognition for ATM banking transactions in Singapore.
Get Smart: Long-term tailwinds
OCBC is staying positive on the long-term outlook while also being mindful of headwinds that may impact its business.
It will focus on its twin hubs of Singapore and Hong Kong for growth and enhance its Greater China transaction and investment banking to support client acquisitions there.
At the same time, the bank has also strengthened its private banking hub capabilities across Singapore, Hong Kong, Dubai, and London.
Its recent collaboration with Ping An Bank (SHE: 00001) should help OCBC to broaden its client base and its suite of products.
This move, along with the cross-boundary scheme that was given the green light by Chinese and Hong Kong regulators, should open up more opportunities for its Hong Kong subsidiary to capture fund inflows.
If you want more stock ideas, start looking out for these 5 unique traits in the stock market. Companies with these traits can possibly pay you dividends for life. Discover what these traits are in your FREE special report “Dividend Stocks That Can Pay You For Life”. Click here to download now.
Follow us on Facebook and Telegram for the latest investing news and analyses!
Disclaimer: Royston Yang does not own shares in any of the companies mentioned.
The post OCBC Powers On with Net Profit of S$1.2 Billion in its Latest Quarter: 5 Things Investors Need to Know appeared first on The Smart Investor.
